Jason Garry OIM 210 Exam 2 Study Guide 1 13 Platform Leaders Reading Slides 4 questions a What is a Platform Leadership i Platform Leaders 1 Firms that lead and drive innovation in their industry by stimulating complementary innovations performed by other firms ii Example of a platform 1 Intel Core processor a Used in Mac and PCs 2 The Cloud 3 Xbox 4 Google Maps 5 Amazon Web Services iii Platform Reliant on other people developing content that drives both that content and your product to the consumer iv Product is a platform if 1 It is functionally interdependent with most of the other parts of a technological system 2 When end user demand is for the overall system v Why Build a platform 1 Value a Brings more value to users by creating room for configuration expansion Product fit value a Platform users who make costly investments to 2 Lock In use them b What are the different strategic levers you can use to grow your platform i 4 Levers of Platform Leadership 1 Scope of Activities in house vs ecosystem activities a Example Out of the top 10 apps in the app store 3 are made by apple 5 are from google 2 Technology design and IP features functions in platform a Degrees of openness b Leading companies guard their core technology but utilize tools such as modular architectures and disclosure of interfaces to ensure the supply of complementary products 3 Encouraging relationships with complementors a Collaborative vs competitive i For long term effectiveness platform leaders must follow 2 goals simultaneously 1 Search for consensus with complementors about technical standards and how they interface with products 2 Show the way by providing new complements in house ii Leaders can reduce external tensions with a humble approach and by acting on behalf of the entire industry 4 Internal organization that facilitates platform changes a Coping with internal external conflicts b Platform producer must generate an internal org that enables it to manage complementor relationships with ease c How do you dethrone other platform leaders i Similar to Disruptive Innovation 1 Find a distinctive and underserved segment of users 2 Leverage your existing platform 3 Differentiate based on emerging needs 4 Simplify the business model for the complementors d Coring vs Tipping i Coring Creating a new platform where one hasn t existed before ii Tipping takes the problem of how to win platform wars by building market momentum e What does the platform ecosystem look like i Platform complementors user 1 All depend on one another to be successful 2 12 History of the Internet Slides a First network first email first browser first mouse i Cerf and Kahn coin the term Internet ii First Network 1 Xerox 2 Tim Berners Lee and Robert Cailliau created the world wide web 1990 a HTTP HTML Web Browser Server Software b Connected everything iii First Email BITNET by IBM iv First Browser NetScape Mosaic v First web server 1 The NextCube vi First Mouse WYSIWYG Word 1 Created at PARC Palo Alto Research Center by Xerox b Difference between www and the Internet i WWW The actual websites the way to access information ii Internet The entire system as a whole massive network and infrastructure wires cables routers 1 Connects millions of computers together that are also connected to the internet c Root Level Domains i Net Edu Org Gov Com d Dot Com bubble Where when how i Over valued beginning companies on the internet 1 These companies were called dot coms ii Companies could cause their stock to increase by adding an e prefix or a com at the end 1 Called Prefix Investing iii The rapidly increasing stock prices market confidence individual speculation and available venture capital investors were willing to overlook traditional metrics such as P E Ratio in favor of basing confidence off technological advancements iv Bubble took place between 1999 and 2001 v Companies that failed 1 Pets com 2 Flooz com 3 Kozmo com vi Before the bubble companies business models relied on harnessing network effects by operating at a sustained net loss and to build market share 1 These companies offered their services or end products for free with the expectation that they could build enough brand awareness to charge profitable rates later and turn profit vii At the height of the boom it was possible for a promising dot com to make an initial public offering IPO of its stock and raise a substantial amount of money even though it had never made a profit viii Loss of 5 trillion in 2 years Important Names of www and Internet e f Business models in the Dot coms 3 25 Ch 6 Network Effects Chapter a Terms i Compatibility ii Envelopment iii Barnacles 1 Customers who are tightly anchored to the firm iv Congestion effect v Switching costs The cost a consumer incurs when switching from one product to another 1 Can include actual money spent time spent or data lost vi Lock in While chasing new customers make it impossible for existing ones to leave 1 Ex Apple with iTunes vii Metcalfe s Law Inventor of the Ethernet network standard 1 States that the value of a telecommunications network is proportional to the square of the number of connected users of the system n2 viii Leapfrogging Competing by offering a superior generation of ix Platforms Products and services that encourage others to offer technology complementary goods x The Osbourne Effect When a firm preannounces a forth coming product or service and experiences a sharp and detrimental drop in sales of current offerings as users wait for the new item b Competing in Networked Markets i Blue Ocean Strategy An approach where firms seek to create and compete in uncontested blue ocean market space than competing in spaces that have attracted many similar rivals ii Porters 5 Forces iii Early movers have a HUGE advantage until they don t iv Ecosystem of Complementary goods c Concepts i What are the components of a network effect 1 The value derived from network effects comes from three sources exchange staying power and complementary benefits a Exchange facebook for 1 person isn t fun the person with the first fax machine just had a paper weight i Each new person adds value to the network service b Staying Power Users don t want a service that is likely to vanish at any point i The long term viability of a product or c Complementary Benefits Products or services that add additional value to the primary product or service that makes up a network i Ex How to books etc 1 Network effects are among the most powerful